The roadblock was unexpected. Driving to Colombo along Sri Lanka's south-west coast, we were forced on to a sidestreet by police in Hikkaduwa, one of the island's main tourist centres. There must have been a multiple crash, we assumed, as the detour along narrow village lanes took us past rice paddies shimmering in the afternoon sun. Back on the coast road, fleets of ambulances racing south seemed to confirm our suspicions.

Later we discovered the problem was a bomb. Eleven people had died when a rucksack detonated in a crowded long-distance bus. Although not targeted at foreigners, the site chosen for the atrocity was in part a blow at the country's weakened tourist economy which has not yet recovered from the 2004 tsunami. Buses have never been hit in tourist areas before. Along with a bomb on a bus going east out of Colombo the previous day, the explosion was also designed to strike fear into every Sri Lankan traveller.

Like terrorist attacks on civilians anywhere in the world, this one was "mindless", to use the epithet that politicians and editorial writers always employ on these occasions. Killing people who have no connection to political decision-making is never right. But the bus bombs did not happen in a vacuum, according to analysts in Colombo. They were a predictable stage in the cycle of violence involving the Sri Lankan government and its guerrilla opponents that is making a mockery of Sri Lanka's so-called peace process.

The Liberation Tigers of Tamil Eelam (LTTE) have been fighting for a separate homeland for decades. As usual, they denied responsibility for the bombs, but it is assumed this was their answer to an escalating military campaign by the most hardline government since independence.

Sri Lanka has long been a test case for the complexity of dealing with political movements that turn to terrorist methods, almost always as a last resort. Condemning their choice of targets while ignoring their complaints and the degree of support they command leads only to political stalemate and more bloodshed. Northern Ireland, the Basque country and the Palestinian issue show it is better to talk to terror users who have significant popular backing than to isolate them.

Sri Lanka's Sinhalese elite seemed to know this. Under Norwegian mediation the then government made an interim peace deal with the LTTE four years ago. Although the EU listed the Tigers as a terrorist organisation last year (a badly timed and stupid move), it still urges the new government to go on talking. So does the US, in spite of its war on terror. The Tigers are not Muslim. They have a local, not global, agenda, so any attempt to link them with an anti-western jihad is laughable.

It is equally absurd to use war to disarm them. Yet this is what President Mahinda Rajapakse is attempting, perhaps motivated by revenge after his brother, the defence secretary, and his army commander survived assassination attempts. Rajapakse's picture bedecks hoardings around Sri Lanka in an unprecedented cult of personality. He has taken to visiting Buddhist shrines on state occasions in a chauvinistic sop to the most dominant of Sri Lanka's four religious communities.

Worst of all, he is destroying the peace deal by trying to reoccupy the areas recognised as under Tiger control. Almost 4,000 people have died since fighting resumed last year; tens of thousands are homeless after government artillery and air attacks in the east of the island. The government has succeeded in capturing most of the Tiger areas there, and now appears to want to hold provincial elections and install a puppet ruler. Rajapakse's chosen candidate would be Colonel Karuna, a commander who broke from the LTTE three years ago and was quickly recruited by the Sri Lankan army to work with them. The government initially denied this, and because of heavy censorship local media had difficulty reporting it. But visitors to Batticaloa in the east now say no attempt is made to hide it. Karuna's camps are close to army bases and police checkpoints, and his ground attacks coincide with government offensives.

According to Unicef, the UN children's agency, the government is complicit in Karuna's abductions of hundreds of children to become soldiers. A UN security council working group will take up the issue of Sri Lanka (and Nepal) in New York today. Sri Lanka is one of several countries under the UN spotlight, and Ban Ki-Moon, the new secretary general, has warned of "targeted measures" (ie sanctions) if the practice is not stopped. Ironically, Sri Lanka chose to be on the list that was drawn up when only the Tigers were seizing children.

The government promised to investigate the charges, but abductions continue, says Unicef. The security council must not let Sri Lanka off the hook until proof emerges that it has stopped the practice and got Karuna to release all the children he has seized. The LTTE's use of child soldiers is on a far greater scale than the army's (Karuna was notorious for it when he was still with the Tigers), but elected governments have a duty to show they are not adopting the crimes and brutalities of their opponents. Sri Lanka's foreign minister, Mangala Samaraweera, was brave enough to make that point last month. Rajapakse promptly took his job away.

Sri Lanka's humanitarian crisis is dire. Kidnappings and disappearances, apparently by the police and allied forces, have resumed in Colombo. The civil war has made more than 200,000 people homeless in the past year, almost as many in the same period as in Darfur, which gets 10 times the international attention. Like the Sudanese authorities, the government is using its monopoly of air power to conduct a vicious counter-insurgency in the face of lesser rebel provocations.

The outside world can have a role and India may be the most important player. Floods of Tamil refugees are forcing it to take a renewed interest in its neighbour. It has warned Rajapakse against trying to split the east from the north, a device to foreclose a viable homeland for Tamils and reject a federal solution that most independent experts see as the only compromise likely to end the war.

Above all, India is refusing to sell arms that can be used for counter-insurgency. That is the best signal. If he believes he can defeat an enemy as widely supported by Tamils as the Tigers are, Sri Lanka's president is as "mindless" as any bus bomber.